Liwwa: finance for SMEs in Jordan

SMEs are drivers of economic growth, creating new jobs and contributing to a country’s GDP. Their development is however often hampered by limited access to funds. Jordan is also dealing with such a situation.

SMEs in Jordan fall between two stools: they require higher loans than microfinance institutions provide, but cannot get a loan through traditional banks either, due to lack the credit history and collateral. The latter is no problem for liwwa. Using smart digital technologies for credit analysis and rating, liwwa offers SMEs affordable, collateral-free loans up to 100,000 U.S. dollars.

Liwwa’s solution

Liwwa uses a credit analysis engine, mCAE, to analyse data such as operational years, suppliers and customers, cash flow, and the legal and commercial background of the loan applicant. By comparing the data to other outstanding and repaid loans, mCAE can predict whether the loan is likely to be a good investment or not. And because this all happens digitally, liwwa is able to provide a decision and the loan within one or two days.

Although some loans are funded by liwwa and local Jordanian banks, liwwa also operates as an online lending platform. After a few weeks, approved loans are posted on this crowdfunding platform, so that investors (both individuals and institutional) can also fund these directly. In return, investors receive a monthly return on their investment. Since 2015, the median return is approximately 13%.

Cooperation with Dutch government

The Netherlands Ministry of Foreign Affairs supports liwwa in its mission to create jobs and income growth in Jordan through the Dutch Good Growth Fund (DGGF). The first international institutional investor to provide liwwa with debt capital, the DGGF stimulates economic and social growth in emerging markets through trade and investments. Decent work and economic growth are part of the United Nations Sustainable Development Goals (SDGs), which the Netherlands is committed to.

By backing liwwa, the Netherlands helps to create income growth, jobs, goods and services in Jordan, while contributing to increasing its GDP. Since its foundation in 2015, liwwa provided loans to over 1,000 applications, for a total amount of around 46 million U.S. dollars. It helped to create just under 1,000 jobs, generated 3.6 million U.S. dollars in income, and 25.6 million dollars in economic output. And these are just the short-term results. In the long run, it also contributes to more sustainable growth by for example enabling SME to upgrade technology and equipment. The multiplier effect means that one dollar invested will create an added value far beyond that.   

Liwwa’s future plans

Part of the DGGF funding was used by liwwa to replicate this loan process in Egypt, another high potential market where SMEs have limited access to capital. With its Sharia compliant loan product, liwwa can potentially be exported to other countries in the Middle East and North Africa after that.

Photo credits: Andrew Moore